Strategic Management Its no joke!

Strategic ManagementIts no joke!

D30BU – Strategic Management in the Built Environment Introduction to Strategy, Strategic Planning and Situation Analysis

Relevance • Group discussion: • Is this relevant to your profession? • Is this relevant to your degree? • Is this relevant to you? • What do you want from this course?

Relevance of strategic management • Professional bodies view this as fundamental to the success of their members education (you) and their own success – the bodies themselves are an organisation! • Your profession requires you to understand and display a good knowledge of strategy. They argue that your success and theirs is dependent on such knowledge. • The success of your professions strategy is rooted in its members holding strategic management positions within organisations and in its members ability to think.

Relevance of strategic management • You will all have to exercise your technical skills within the activities of an organisation but your success is also dependent on you understanding the ‘game’’. It’s not always as simple as you may think. • Organisations want strategic thinkers who understand the challenges organisations face and can develop and implement solutions. • Your accredited degree is therefore based on the premise that you are developed into strategic thinkers who can grasp and understand the complexity of strategy formulation and implementation.

Relevance of strategic management • HWU SBE is not here to provide graduates with only technical skills, we want to provide high quality professionals who are capable of independent thought, taking the initiative, debating and communicating complex ideas. • By doing the above, we are responsible for developing the disciplines and the professionals as well as industry. • Remember we are a HE institute and you will leave here with an honours degree that represents HWU

Get into groups If you don't have a group then wait at the side and we will allocate you

The Prisoners Dilemma • The prisoners dilemma • Two prisoners interrogated privately • If both keep quiet, they both get two years inside • If one of them confesses, he/she will go free and the other will get five years inside • If both confess, each will get four years inside • What would you do? • Would it matter if you knew you would after time has been served be in exactly this position again with the same person?

Strategy and competition • The Iterative Prisoners Dilemma Game • groups • Its a competition – its about winning • Could be described as “share or shaft” but I think that’s going a bit too far! See also ‘golden balls’ by Jasper Carrot • Each group must determine what the strategy is going to be collectively • The objective is to win against your competitor and also others in the marketplace

Strategy and competition • Scoring • Red and Red scores minus 3 points for each team • Blue and Blue scores 3 points for each team • Red and Blue scores 5 points for red team and minus -5 points for the blue team • Round 7&8 scores double • Negotiation after each round • Not sure how many rounds – could be infinite!!

10 minutes for each group to determine the ‘strategy’ before round 1 and 2 Nominate your spokesperson and everyone else must be quiet during the rounds and the negotiation Blue is share Red is take

Round 1 Pass slips of paper to me with your team name and your chosen colour

Discuss your strategy with the group and decide if you want to negotiate with the other group (10 Mins) Negotiate (10 Mins)

Discuss your strategy with the group and decide if you want to negotiate with the other group (5 Mins) Negotiate (5 Mins)

Discuss your strategy with the group and decide if you want to negotiate with the other group (10 Mins)Double Points for 7&8 Negotiate (10 Mins)

Round 7 (Double Points) Pass slips of paper to me with your team name and your chosen colour

Round 8 (Double Points) Pass slips of paper to me with your team name and your chosen colour

Over to the results board!

The Prisoners Dilemma • The prisoners dilemma • Two prisoners interrogated privately • If both keep quiet, they both get two years inside • If one of them confesses, he/she will go free and the other will get five years inside • If both confess, each will get four years inside • What would you do? • If you do not know what the other organisations are thinking, how can you formulate a completely rational and infallible plan • Strategy is made of such dilemma’s and therefore it is more important to focus on the process rather than the outcomes

The battle is over Think it over May look like a simple game but there are many lessons to be learnt about people, behaviour and business

Why would this game be relevant to you? Helps you challenge the illusion of instrumental rationality (Classicism) Challenges the illusion of predictability Helps you explain in part the complexity of strategy Allows you to think more carefully about iterative business relationships in workplace (internal as well) Might even help you grasp the complexities of your own ongoing relationships Wrestles you out of the view that business is a rational social setting Helps you see why businesses and strategies more often than not, FAIL.

Prisoners Dilemma... Helps you challenge the illusion of instrumental rationality (Classicism) Challenges the illusion of predictability Helps you explain in part the complexity of strategy Allows you to think more carefully about iterative business relationships in workplace (internal as well) Might even help you grasp the complexities of your own ongoing relationships Wrestles you out of the view that business is a rational social setting Helps you see why businesses and strategies more often than not, FAIL.

Groups – required today • Do research to answer the question below • Provide 2 page summary of your reading on this subject and note down your sources • We will finish early this week so you can begin your research, reading and writing • Use the journal search engines and also check out Google scholar. • Books • This research helps you develop thoughts arguments and ‘giants’ shoulders to stand on for the exam! What is strategy?

Groups – required today • I want the group to answer in two pages, the following exam type question: • Why is strategy so complex? • Think about the prisoners dilemma, who is the strategy for, what is its purpose, what are the goals, symbolic versus substantive activity, illusion of rationality, predictability/risk, etc...

Strategy and strategic management My thoughts and opinion to get you thinking a little bit more Feel free to disagree

The important role of strategic management • All organisations exist in a dynamic environment that must be understood • It is argued that a vision of the future is necessary to direct decisions that impact on the future – i.e. investment, outsourcing, mergers, structures… • NB. Operational performance means nothing if disconnected from a strategic understanding of the ‘external environment’ • The structure of the firm will prove more or less efficient depending on an understanding of context, the future, decisions and social phenomena • The values and cultural assumptions that underpin a firm are based on an understanding of context, the future, decisions and social phenomena • Big organisations need strategy made explicit

The importance of strategy • Strategic managers are responsible for strategy – strategy provides: • those within and outwith the organisation an understanding of purpose and direction • A framework to help coordinate the assets, activities and functions of the organisation • An overarching structure of control over people to serve the objectives of the organisation • A model within which people in the organisation can own through participation the direction of the business

What is strategy? Strategy-as-art would be very different from strategy-as-science Whittington is seems keen to distance strategy from an exact science – why? Clegg et al. strike a cautionary note similar to Whittington but elaborate on the purpose of strategy – GROWTH AND SUCCESS Is it the focus on a rational process that attempts to address complexity and unpredictability? When you have read more hopefully you will be able to answer this question or at least address it coherently • “the art or science of the planning and conduct of war” Collins (1995) • “…strategy should be treated as the contested and imperfect practice it really is…” Whittington (2000) • “Strategy is supposed to lead an organization through changes and shifts to secure its future growth and sustainable success” Clegg et al. (2005)

Formulating and implementing strategy – is it gambling?

Where do we find strategy and why? • Football teams, political parties, personal strategies (career, love, physical well-being) • Our concern is however with organisational strategy • Post rationalised back through time but… • Is relatively young management discourse…Why? • Strong monopolies have no need of strategy… • Contemporary discourse of strategy is developed around issues of competition and marketplaces • The metaphor of war pervades the literature • Organisational versus project strategy Clegg et al. (2005), p409

Owners/founders Managers Employees Unions Partners Customers/users Suppliers Investors Governments and regulators Who influences strategy? Much of the contested nature of strategy development evolves from the disparate stakeholders who seek to influence strategy Who might they be?. It cannot be assumed that these stakeholders share similarly held beliefs about the purpose of strategy

Purpose of strategy? • From who’s perspective is strategy defined? • It is NOT easy to define a single purpose for one organisation! • What role might power play? • In a ten year period might the balance of power shift and thus the relevance of strategy to those in power?

Strategic goals are many! • Strategy develops in a highly contested environment within large organisations’: • Maximize shareholder value • “Monopoly” power • Bigger can be better • Profits – above average • Success – but what is success? • Does strategy imply or require exploitation? • Tactics – ethics! • Strategic goal setting is dominantly determined by high level managers although decisions are not necessarily disconnected from other levels of management • Broadly speaking though the label ‘strategic management is used to describe strategy activity • Would the purpose differ for public sector organisations?

The influence of strategy • Strategy informs decision making • Decisions on the use of resources • Decisions regarding the scope of operations • Decisions concerning market penetration • Decisions concerning organisational structure • Strategy shapes culture through informal influence on decisions regarding what is important and what is not – values, assumptions

The influence of strategy • Strategic decisions will also have a knock on effect on the decisions taken at an operational level • Strategy reflects the views of those who have power and thus decision making is bent towards this end? • Decisions made will affect the long term direction (success) of the company…..do they determine the efficacy of strategy as a process? • It will affect me – will I have a job next week, can I move up the corporate ladder, is this the kind of company I want to work for, am I the kind of worker the organisation needs in the future? Do I want this companies facilities in my backyard?

Hierarchy of Strategy Can we assume that it is a simple job to have a single strategy that unifies each level as they fan out? Corporate Strategy Corporate HQ Business Strategy Business Unit Business Unit Business Unit Functional Strategy Operations Finance Marketing Research & development Human resources

Strategic issues • What issues would you consider in developing your strategy in an organisation if you were a strategic manager? • the purpose of the organisation • aims and goals • The values of the organisation (culture) • The structure of the organisation • Relationship with the market • Investment (recruitment, retention, replacement, research) • Note: these issues may be concerned with developing growth OR addressing a decline OR an exit strategy! Cole (2001), p11; Cole (2004), p139

Strategic questions • What questions would you ask as a strategic manager? • What is our core business and markets? Are these right? • Foresight – where would we like to be? • Where are the opportunities for growth? • Who or what threatens our future? • Do we own the right assets for the future and do we have the right partners? • What must we do to sustain our current position and yet develop for future growth? • Are there any recognisable trends in the past that relate to the future? Cole (2004), p139

How does strategy manifest itself • Mission statement • Policies or indeed lack of policies • Actions or indeed inaction • Structures or lack of structure • Management style • Culture • In fact all aspects of organisational life – “its all around us?” Maybe…

Hmm……….. “…as Richard Whittington said almost 10 years ago, the average book on strategic planning [management] is pretty cheap. So, how come, if the secrets of strategic management are so cheaply and easily available, many organizations fail to develop successful strategies? Is there something wrong with the literature – or maybe even the concept itself?” Clegg et al. (2005) Our next lecture will explore some theories and approaches to strategic management that might reveal an answer. Till then………

Questions

Strategic Management Its no joke!